Aave Still Struggling Weeks After Massive Kelp DAO Hack

[johnblockbuster]

The fallout from April’s $293 million Kelp DAO exploit continues impacting the DeFi sector even after rsETH recovery operations were completed. While Kelp DAO says its restaked ETH token infrastructure is now functioning normally again, Aave’s total value locked has yet to recover from the crisis.

The exploit, attributed to North Korea’s Lazarus Group, triggered a major liquidity shock after attackers deposited stolen rsETH into Aave as collateral to borrow wrapped Ether. The event left the lending protocol with around $190 million in bad debt and caused Aave’s TVL to collapse from $26.4 billion to below $14 billion within weeks.

Although recent data shows net outflows from Aave have slowed, the platform’s TVL remains stuck between roughly $14 billion and $15 billion. The incident has renewed concerns across crypto about how interconnected DeFi protocols can amplify systemic risk when large exploits occur within major liquidity ecosystems.

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one exploit turning into billions in liquidity disruption is basically the blockchain version of financial dominoes

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aave’s prolonged tvl weakness suggests confidence recovery in decentralized finance often takes significantly longer than technical infrastructure restoration itself